My creditor has initiated IBC insolvency proceedings against my company in New Delhi; what defences can I raise and what is the corporate debtor's position?

Detailed Legal Analysis

If a creditor has initiated insolvency proceedings against your company under the Insolvency and Bankruptcy Code, 2016 (IBC), there are several defenses you may raise to contest the claim and protect your corporate debtor's position.

Here are key defenses you can consider:

• Dispute Over Debt: If you can prove that the debt claimed by the creditor is disputed, the insolvency application may be dismissed. Section 8 of the IBC mandates that the creditor must deliver a default notice, and you can argue that there is a pre-existing dispute regarding the debt.
• Operational Creditor Definition: Under Section 5(20) of the IBC, ensure that the creditor qualifies as an operational creditor. If they do not fit this definition, you can challenge their standing to file the application.
• Default Amount: You can contest the amount claimed by the creditor. If the default amount is less than the threshold limit (currently ₹1 crore for corporate debtors as per the IBC amendment), the application is not maintainable.
• Time Barred Debt: If the debt is time-barred, it can be a valid defense. According to Section 137 of the Limitation Act, 1963, if the creditor has not initiated proceedings within the limitation period of three years, the debt can be contested.
• Non-Compliance with IBC Procedures: You can argue that the creditor has not complied with the procedural requirements set forth in the IBC, such as failing to send a proper demand notice under Section 8.
• Settlement Proposals: If you have made a proposal for settlement or restructuring of the debt, you can argue that the creditor should have engaged in negotiations before filing the insolvency application. This is particularly relevant under the IBC’s spirit of resolution over liquidation.
• Fraudulent Transactions: If the creditor has engaged in fraudulent activities or has acted in bad faith, you may raise this as a defense to challenge their application.

In terms of the corporate debtor's position, it is essential to respond promptly to the insolvency petition, typically within 14 days of receiving notice. Failure to do so can lead to an automatic admission of the application. Engaging a legal expert to navigate the proceedings and filing the necessary responses is crucial to protect your corporate interests.

Understanding your rights and defenses under the IBC is vital in navigating insolvency proceedings effectively.